News Column

BRIEF: Sweden's shock rate cut puts pressure on Norway

July 7, 2014

By Johan Nylander, The Swedish Wire, Stockholm

July 07--Analysts believe Sweden's surprise interest-rate cut last week will probably prompt a Norges Bank response to shield the economy from a strengthening currency.

"It increases the pressure on Norges Bank to be more expansive in their monetary policy either by cutting or by keeping the rate low for longer," Kjersti Haugland, an analyst at DNB ASA (DNB), Norway's biggest lender, told Bloomberg.

July 3 Sweden's central bank unexpectedly lowered its main interest rate by half a percentage point to 0.25 percent, matching a record low from 2010, and predicted no increases until the end of next year. Policy makers are acting to prevent deflation from taking hold as low demand is preventing business from raising prices.

The following day Sweden's government cut its growth forecasts as weak developments abroad weigh on an expansion in the largest Nordic economy.

Policy makers in Oslo now have to contend with record low rates in Sweden and in the euro area, the nation's top trading partners, Bloomberg said. Also the European Central Bank reduced borrowing costs a month earlier, with both pledging to keep policy loose for a long time.


(c)2014 The Swedish Wire (Stockholm, Sweden)

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Source: Swedish Wire, The

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